Public Interest Winding Up Overview
Public interest winding-up is when a company is wound up in the public interest by the Secretary of State.
The aim of a public interest winding-up is in effect to protect the public. The Court will be minded to do so when it is just and equitable.
Although it may be the case that the Secretary of State, who is petitioning the Court for a public interest winding up on a just and equitable basis, considers that it is necessary, they will still need to convince the Court to do so, because of the serious consequences in respect of the business of a company that is to be the subject of a winding-up order.
Activities Resulting In Public Interest Winding Up
In order for the Secretary of State to be successful in obtaining a public interest winding-up, there is no requirement for the company concerned to have been engaged in any illegal activity. However, it is a matter of consideration as to what is and is not in the public interest.
Examples of what may constitute conduct by companies that are contrary to the public interest may involve acts that are inherently objectionable, and therefore contrary to the public interest.
Conduct can include acting with what is referred to as a lack of commercial probity, which may involve preying on the public and inducing members of the public to engage in transactions that are of no benefit to them and which may prejudice them.
However, it is not all one-way traffic from the point of view of the Secretary of State as the Court has discretion as to whether or not it will grant a public interest winding-up order. The Court is a court of law, not a court of morals and the Court must be satisfied that there are sufficient reasons of notable weight to justify taking the action of winding up a company on a just and equitable basis in the public interest.
The Court undertakes therefore a balancing exercise. The public interest issues need to be identified and the basis upon which the public will be served by the making of the winding-up order needs to be determined.
A company can be subjected to a public interest winding up if it fails to cooperate with investigations by the authorities. This point was highlighted in a public interest winding up case in the matter of Secretary of State for Business Energy And Industrial Strategy v Sentor Solutions Commercial Ltd & Ors [2022] EWHC 2734 (Ch):
Ms McGowan also reminds me that, in the case of Secretary of State for Trade & Industry v Atlantic Property Ltd [2006] EWHC 610 (Ch), Collins J held that it was just and equitable for a company to be wound up where there had been an unsatisfactory response to a s.447 investigation (meaning that the company’s affairs could not be properly investigated), a failure to keep proper accounting records, a lack of transparency in the company’s affairs, the company was insolvent and where there was confusion between the relevant company’s affairs and the affairs of other entities.
